PPH is rock bottom now. Record revenue's news just out
PHP Healthcare Reports Results For Fiscal 1998
Record Revenues of $400.1 Million (72% Increase Over Fiscal 1997) _ Positive Operating Cash Flow of $15.8 Million for Fiscal Year _ Total Stockholders' Equity of $51.7 Million at April 30, 1998 (More Than Double Previous Year)
August 13, 1998 09:10 PM
RESTON, Va., Aug. 13 /PRNewswire/ -_ PHP Healthcare Corporation PPH today reported record revenues of $400.1 million for its 1998 fiscal year ended April 30, 1998, a 72% increase over the $232.4 million recorded in fiscal 1997. The net result for fiscal 1998 is a reported loss of $47.6 million, or $3.06 per diluted share, before a deemed dividend and extraordinary items. Cash from operating activities was a positive $15.8 million, compared with a negative $3.6 million a year ago.
Included in the fiscal 1998 results are certain reserves and charges totaling approximately $12 million related to the Company's decision to narrow its strategic focus and concentrate on its Pinnacle Health operations in New Jersey, its Medicaid HMO operations, and its employer-based managed care operations. In implementing this decision, PHP recently announced that it was discontinuing its correctional care line of business and would discontinue certain other government activities as current contracts expire. The Company also announced its withdrawal as a minority partner from three physician practice management joint ventures established over the past three years.
PHP's major growth opportunity is its Pinnacle Health operation, which increased dramatically in 1997. It also contributed significantly to the reported loss for the year. Six months of this expanded operation are included in fiscal 1998 results. Notwithstanding the recorded loss, substantial improvements in the operating results for this business have been accomplished. Factors which had and will have the most impact on current and future earnings are summarized below.
1. The conversion and consolidation of claims operations from contracted HMOs to Pinnacle Health caused a delay in access to information and inhibited management's ability to take timely action to control costs. The conversion and consolidation are now complete.
2. Obtaining regulatory approvals delayed the implementation of certain cost reductions and consolidations in health center operations, causing a negative impact on fiscal 1998 earnings. For example, the closing of four health centers occurred four to eight months later than originally anticipated, while implementation of advantageous new contracts for mental health, pharmacy, and laboratory services also were delayed.
3. Savings from the implementation of the Company's medical management system accumulate at a slower pace than originally anticipated due to the significant re-tooling of the medical infrastructure previously in place. Pinnacle Health has completed its medical management infrastructure, which is now fully operational. Recent utilization results indicate that the system is working well and will contribute significantly to future cost reductions. 4. The conversion from HMO network agreements to Pinnacle Health provider agreements took longer than anticipated. Consequently, medical costs for providers were higher than originally anticipated. At present, however, the Pinnacle Health network has expanded from 3,200 to more than 7,000 health care providers with rates substantially below pre- Pinnacle agreements.
With the above as a firm foundation, Pinnacle Health now is instituting Phase III of its delivery system development. This phase focuses on the expansion of the center-based delivery system through affiliations with the existing provider network. These changes are expected to produce substantial, additional medical run rate savings.
"We are profoundly disappointed in the financial results for fiscal 1998," said Jack M. Mazur, President and Chief Executive Officer. "We are convinced, however, that PHP Healthcare has the management and systems in place to deliver high quality health care at a reasonable price and produce a return for our shareholders. The accumulation of extraordinary and one-time charges, coupled with the delays encountered in the first six months of the expanded Pinnacle Health operation, cloud PHP's true earnings potential. A lot has been accomplished, but more needs to be done because we are still not at the level where we can meet our high expectations for profitability."
A medical management company, PHP Healthcare Corporation manages medical risk through the acceptance of global capitation arrangements with HMOs and other healthcare payors. The Company also offers a full range of management services to the physician groups and hospitals that participate in provider- based networks developed by PHP Healthcare. Because health care is a local service, PHP's managed delivery systems are tailored to the needs of individual communities and patient populations. Operating primarily along the Northeast, mid-Atlantic, and Southeast corridors of the United States, PHP Healthcare has more than 10,000 physicians employed or under contract and responsibility for approximately 300,000 covered lives.
Except for historical information, the statements preceding are forward- looking statements that involve risks and uncertainties. Investors are cautioned that such statements are only predictions and the actual events or results may differ materially. These forward-looking statements speak only as of this date. The Company undertakes no obligation to publicly release the results of any revisions to the forward-looking statements made today to reflect events or circumstances after today, or to reflect the occurrence of unanticipated events.
PHP HEALTHCARE CORPORATION AND SUBSIDIARIES
Condensed Consolidated Balance Sheets
April 30, 1998 and 1997
(In thousands)
ASSETS 1998 1997
Current assets:
Cash and cash equivalents $ 5,702 $ 15,765
Accounts receivable, net 70,400 45,800
Other current assets 7,331 14,379
Total current assets 83,433 75,944
Property and equipment, net 88,070 58,444
Intangible assets, net 61,628 7,275
Other assets 20,449 6,710
$ 253,580 $ 148,373
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Note payable to bank $ --- $ 9,200
Current maturities of notes payable-other
and finance lease obligations 2,922 1,716
Accounts payable 19,957 12,036
Claims payable-medical services 65,923 8,739
Other current liabilities 17,725 14,287
Total current liabilities 106,527 45,978
Notes payable-other and finance lease obligations,
net of current maturities 24,880 3,964
Convertible subordinated debentures 66,548 66,032
Other liabilities 3,364 2,949
Total liabilities 201,319 118,923
Minority interest 554 4,303
Total stockholders' equity 51,707 25,147
$ 253,580 $ 148,373
PHP HEALTHCARE CORPORATION AND SUBSIDIARIES
Condensed Consolidated Statements of Operations
Years Ended April 30, 1998 and 1997
(In thousands, except per share data)
1998 1997
Revenues $ 400,130 $ 232,369
Medical costs 394,037 189,477
Medical margin 6,093 42,892
General and administrative expenses 39,937 30,846
Restructuring and other non-recurring charges 1,500 14,647
Operating loss (35,344) (2,601)
Interest expense and other (8,985) (3,935)
Loss before income taxes and extraordinary item (44,329) (6,536)
Income tax expense (benefit) (8,800) (2,487)
Loss before extraordinary item (35,529) (4,049)
Extraordinary item - loss on early
extinguishment of debt (9,275) --
Net loss (44,804) (4,049)
Deemed dividend (2,800) --
Net loss available to common shareholders $ (47,604) $ (4,049)
Basic and diluted loss per share:
Loss before extraordinary item and
deemed dividend $ (3.06) $ (0.37)
Deemed dividend (0.24) --
Loss before extraordinary item (3.30) (0.37)
Extraordinary item (0.80) --
Net loss $ (4.10) $ (0.37)
Basic and diluted weighted average number of
common shares outstanding 11,615 11,038
PHP HEALTHCARE CORPORATION AND SUBSIDIARIES
Consolidated Statements of Cash Flows
Years Ended April 30, 1998 and 1997
(In thousands)
1998 1997
Cash flows from operating activities:
Net loss $ (44,804) $ (4,049)
Adjustments to reconcile net loss to net
cash provided by (used in) operating
activities:
Depreciation and amortization 12,238 5,372
Extraordinary loss on early extinguishment
of debt 9,275 --
Benefit for deferred income taxes (8,800) (2,530)
Other items, net 130 1,395
Changes in operating assets and liabilities 47,812 (3,790)
Net cash provided by (used in) operating
activities 15,851 (3,602)
Net cash used in investing activities (20,508) (40,654)
Net cash provided by (used in)
financing activities (5,406) 11,374
Net decrease in cash and cash equivalents (10,063) (32,882)
Cash and cash equivalents, beginning of year 15,765 48,647
Cash and cash equivalents, end of year $ 5,702 $ 15,765
SOURCE PHP Healthcare Corporation
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